#419 Recruiting and KPIs - an article written by Niels Brabandt
Recruiting and KPIs
an article written by Niels Brabandt
You cannot manage what you cannot measure.
As incorrect as it may be today, this statement is still considered the ultimate truth at management levels. Of course, there are numerous aspects that you can only measure to a limited extent, if at all. Nevertheless, these aspects are important for your management work. Numbers, data and facts are undoubtedly significant. However, soft factors are also important in addition to hard figures (KPIs, key performance indicators, key figures). The so-called CSFs (critical success factors) must always be considered equally. Management by numbers, i.e. leadership based solely on figures, should be avoided. Nevertheless, you need verifiable results, especially in recruiting.
How can you optimally set up your recruiting, and which key figures are relevant?
KPIs
When looking at numbers, it is crucial to make a selection. The KPIs listed below are exactly that: a selection. If you collect too many key figures, the principle already applied in medicine applies: if you measure a lot, you also measure a lot of nonsense. In practice, the arbitrarily selected key figure is presented to management to paint a positive picture and design a narrative that does not correspond to reality. Therefore, always make sure to choose the relevant figures to paint an accurate picture of the organisation's reality. Employees, in particular, are quick to notice when management celebrates successes that do not exist.
Practice
The selection is limited to five of the most important key figures you should always consider.
TTF – Time to Fill. This KPI refers to the time between the approval of a new position and a hired person's first day of work. Remember that an honest figure can only be one that also considers the approval process.
OAR – Offer Acceptance Rate. You are obviously on the right track if many of your offers are accepted. However, if many are rejected, either your offer is not good enough, no longer up to date, or the presentation of the offer leaves something to be desired. You can then take appropriate corrective action.
CPH – Cost per Hire. How much does each new hire cost you? Consider everyone hired and receives a salary. In general, work must be paid - no exception. Artificially lowering the cost per hire by including unpaid interns is an unsustainable practice that does not lead to real success.
QOH – Quality of Hire. How good are the people you have hired? A survey after only 6 and 12 months distorts the figures, as you deliberately only consider those who have already passed their probationary period. In the first year, if you are genuinely interested in the quality of your selection, this figure should be surveyed monthly.
TTH – Time to Hire. This KPI refers to the time from the start of recruiting to the acceptance of the contract. Remember that recruiting does not begin when the job advertisement is posted online, but all preliminary discussions with agencies must also be considered.
Best practices, typical tricks and how to avoid or detect them can be found in this week's video cast or podcast; see links below.
Implementation
In the beginning, you need to define the roles precisely. Who does what? Who has which tasks? When exactly does what needs to be done, and how? If you do not clarify this in advance, you will have distorted data, especially at the beginning. The reporting system must then be set up accordingly. As a general rule, only collect key figures that are relevant to your organisation, your situation and your actual practice. The more efficiently you set up the reports, the more efficiently you will achieve results.
However, in addition to responsibilities, it is critical to pay attention to accountability. In recent years, it has become common practice to choose figures selectively, influence the collection of data and thus create an internal and external image that cannot be reconciled with reality. Reflecting reality leads to real improvement when appropriate measures are taken to address deficiencies. In the competition for the best talent, it is now more critical than ever that your recruiting process works perfectly, as the application process plays a key role in the impression your organisation makes on the applicant: perfect recruiting, perfect experience, perfect conclusion. You want to achieve this goal, as do the talented individuals who, with excellent recruiting, will be happy to work for you soon.
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More on this topic in this week's podcast: Videocast / Apple Podcasts / Spotify
For the videocast’s and podcast’s transcript, read below.
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Niels Brabandt is an expert in sustainable leadership with more than 20 years of experience in practice and science.
Niels Brabandt: Professional Training, Speaking, Coaching, Consulting, Mentoring, Project & Interim Management. Event host, MC, moderator.
Transcript
Niels Brabandt
Do you like numbers? Please, please don't turn off immediately. Please do not turn off immediately. But when I talk about reports, numbers, KPIs, most people say oh please, no, not again. And we're going to talk about numbers today because our topic today is recruiting and KPIs. When we talk about recruiting, very often recruiting is based on feelings. When you hire that one very, very, very good salesperson anyone says recruiting is amazing and when you do not find the IT admin person you need for six months, you say what does HR and recruiting actually do?
Why do they get paid? And that is not how you evaluate if your recruiting is successful. You need numbers material. However, it is not only numbers and that is what we're going to talk about today as well. Very important here. When we talk about numbers and recruiting I will as always use real world examples. And when I use real world examples it's always covered by the law which fair use and fair dealing in the US and the UK and quoting in the German speaking area.
So I will keep on using real world examples because one person last week sent me a very, very, let's say interesting email where he was very much offended about me using a real world example from a certain company. I can't help it. I can't help it when certain companies do something wrong and it gets to the media and I double, triple and quadruple check all sides of the story and and then it doesn't go too well. At least this company then learned from it and did it better. And I don't think that it was particularly helpful that a former management person from there said I'm very much offended by you even talking about that. We can only learn if we start with talking about what probably didn't go too well. So let's talk about recruiting and KPIs.
Of course we have to talk about KPIs first. KPIs key performance indicator. We're talking about numbers and very important is numbers can never be the only base of your decision. Numbers are important, yeah, very important. However, they are not enough. When you for example have a certain number where you say we hired more people in that area, then I give you an example. When you say for example in London you hired more IT staff than someone in Aberdeen and you compare sizes of the business and you're comparable and comparable industry, yeah, probably there are more people there, there's hopefully more talent, especially post Brexit available in London compared to Aberdeen.
So very important is numbers are not everything, but numbers are important. The message Here is not. Numbers are not relevant. That's not the message at all. You probably know the phrase you cannot manage what you cannot measure. That is an okay ish phrase because today we know you need more than that. Because a couple of things you cannot measure and you still need to manage with them.
Employees mood, for example, you can't manage, sorry, you can't measure, but you need to manage. What we talk about here is csfs. And CSFS is a completely different story. Critical success factors, that is the soft side of the business. Any business that did management by numbers sooner or later ran into significant issues because people simply said, look, I just have to tweak the numbers the way they should look. I do not really change anything, but my numbers look the way they should look. And you say I'm a great person and as soon as I really create customer value.
But maybe the numbers don't look the way they should, you say no. Give you very, very simple example here about KPIs and CSFs. One sales rep from a very well known recruiting company created more than 3 million euros in revenue for the company. That person's goal was 1 million. And then the manager approached that salesperson said yeah, but you didn't do your 50 cold calls a day. And the person yeah, because I was busy making money. So here are your 3 million.
And the manager said yeah, sorry, but you have to do the 50 contacts a day. Cold contacts, 50 a day, at least 50 attempts, you know, so why didn't you do them? And this escalated so much of months that the salesperson left. So you see you need to handle both sides of the game. KPIs and CSFs, the hard numbers, key performance indicators, KPIs and the soft aspect of the business, the CSFs, the critical success factors. So let's talk about reality. And the first thing of course we have to talk about when you have a job opening and you want to know, okay, how long does it really take to hire someone?
That is the so called time to fill. Time to fill means from the very beginning when the job was agreed that there is a job available and you say yes, we need someone until the first day of work. So when they really appeared in reality, either online, remote work or on site with your business. And I can tell you what the issue here is often, and that applies to almost all numbers I'm going to show you. Often the numbers are conducted in a very dishonest manner. So one business just recently showed me a TTF and said, oh yeah, we needed this very senior, totally specialized SAP person. And our TTF is four months.
I mean, let's face it, it is theoretically possible that you had the amazing idea how to find someone within four months from, from the, the agreement to the first moment being there, four months on, on that senior position where usually when you want to leave an organization, it takes a long time until you can really quit. So I really looked into this. So what happened was, and here's the real story. April, two years before, two years before someone said, we really need someone for that position because the client demand on that position is rising. We don't have enough people.
We need someone on. And in that year the answer was, sorry, all the planning for our jobs is already done. We only do it once a year. So this year it's not possible. Please get back to me if it stays relevant. In October of that two years ago year, they said it's still relevant. Could you please, please, please, please get us someone here?
It takes until April of the following year until they said, yeah, I think we should have someone. Then they have another five or six months of discussion if they should really get someone. And in January of this year, they ticked the box. So in the software it says open position. So in the software it was agreed that now you can hire people. And that is the time they took, they took the moment when in the software they said, look, now it's really agreed that we need someone. And that's just dishonest numbers juggling.
If, if, if you do work like that, please do not be surprised that no one's following you and no one considers you a real leader. No one takes you seriously. If you are dishonest with, with numbers, people see that because there are people sitting there for years and saying, listen, I'm waiting for this for more than two years. The whole team is burned out. We probably lost 50% of our staff in that department. We have an employee turnover which is completely through the roof because you do not hire people where we need to hire. And now you celebrate yourself for a 4 month turnover on TTF.
Just not realistic. Just be honest with your numbers. So of course, when you now say, hey, time to fill. Good. What else is it? When you now make offers, you make someone an offer and they can say yes or no. And hopefully they say yes, of course.
However, sometimes they say no, you need to know what is the offer acceptance rate? The offer acceptance rate is the number of proposals you put out there. And then you look at what is the number of agreed proposals. So you send out 100 contracts, 50 get signed. It's a 50% offer acceptance rate. When the offer acceptance rate is too low then you can for example either derive either your offer isn't good enough or other people have a lot of a better offer, an offer which is way better than yours or in worst case both your offer is bad and the other offer is just way better. And I can tell you we still have a lot of lunatic offers out there.
I recently saw a job at in the US where they were looking for a Microsoft Exchange admin for $25 an hour. And I don't care that you are in rural America, no one works in it for that money, full stop. You may or may not like that. And as soon as I say something like that, I know I will receive a message from someone. I work for $7.50 in that logistics company. Filling the racks. Yeah, and that's a completely different job and we can't compare that.
And by the way, even there you shouldn't work for $7.50. The offer acceptance rate shows you how good is either your offer or the packaging or how you present it.
Or, or, or. Because I give you a very simple example, two mid sized companies, both working in craftsmanship, they are looking for electricians. Both have a completely similar offer. One of them has a way higher acceptance rate.
What is the reason? One company simply sends out the contract and says here you are, click on the link and sign the document. The other one calls the person or makes an online meeting if they can't make it on a call and say look I'm going to present to you what we have for you. Benefit here, benefit here. We offer this, we offer that. Benefit here. Bit of a Christmas party here, end of year party here, summer party there.
Benefit, benefit, benefit. Any questions? No? Okay, I send you the link right now, Please sign quickly. And of course people feel appreciated when this happens. So sometimes comparable offers you have to care about the packaging. How do you present your offer.
But when you just have a bad offer with a bad offer, you're not going to get high acceptance rates. Very simple. So when you have, and by the way, please be honest with that as well when someone agrees to your offer, but then they pull out because they say look, just the other company came back and they made a counteroffer and I really think I should go there, sorry, I'm leaving. Then you can't say well I think it's an accepted offer because he said that, that person said yes in the first place. And I saw exactly that happening. Numbers tweaking far away from reality. Again, so be sure, be honest with the numbers.
The next one is cost per hire. When you now say I hire the 100 people, you probably want to know how much is your hiring, how much does it cost? And of course you want to have less cost here. However, again, numbers juggling happens very quickly. I was the host and guiding people through the whole day was hosting the conference and the American CEO pretty much insults Europe of wasting money because their recruiting is way too expensive. And of course you could now say, well, European recruiting might be more expensive because regulation, regulatory and compliance is tighter. Might be, doesn't necessarily be.
Depends heavily on where you are in the US how tight or not so tight the administration and regulatory and compliance around that is. However, what happened there when we look into the numbers is especially in the area of logistics. They just did mass hiring in the U.S. they hired 100 people and then they saw which of these hundred people are good ones and then they kept 50, 60 or 70, depending on the need they have at the moment. And of course your cost per hire is lower when you just hire, hire, hire, hire, hire, and then chuck them out if you don't like them or don't need them or both. Besides the fact that you massively harm your reputation on the market, you artificially put down the number of cost per hire and then you really have to okay, cost per hire. What is the total number that you spend on recruiting?
So, and then you will see, oh, here we are. Your cost per hire is lower, but your overall spend is way higher. So thank you very much for that discussion. Stop doing the numbers tweaking. And especially experienced consultants, if I've been there way too long when I see these numbers I'm going to present to you today, and these are just five out of many we can talk about. When there is suddenly a number which is so surrealistically low, then one option is you have a very low number of hires because then of course data can fluctuate heavily. However, when there's a reasonable number of highs and the number is very low, you either were extremely lucky or you cheated when you did the metrics.
And most 99% cheated on the metrics and just say, oh look, the number went down. Yeah, because you changed the metrics and the way you looked at it, that's not a real change. So cost per hire. Be aware that of course you want to keep cost under control besides just cost. You of course want to also know, are people actually good quality of hire? And I very often see the wrong approach, which is you do an evaluation after 6 and 12 months. Yeah, and of course quality of hire is always great after six and 12 months because when you only do it after six months, you only evaluate the people who will stay after probation time.
And of course they are reasonably good because otherwise you wouldn't keep them. The honest measurement of quality of hire is done on a monthly basis. You do it at least during the first 12 months and then on an ongoing basis. I recommend quarterly. If you can't do that, do it every six months. We know that many companies do it once a year. This one appraisal talk where your whole year gets judged and even science tells you you're not going to talk about the last 12 months.
When someone just give you one scenario. Just imagine I'm your boss sitting there and saying, okay, it's December, let's have this annual appraisal thing here. Okay? Here I have some notes here. Do you remember last year in February when things went wrong and you would probably say no, no, no, because it's too long ago and that's why you can't do it once a year. So quality of hire should be done regularly with new hires, at least monthly for the first 12 months. And if you want to do it less due to costs, which is of course understandable, do it at least quarterly.
That is the minimum to have proper data. But then you can see quality of hire when, for example, quality of hire goes down or up and then you can draw conclusions from that. The last thing, and that is the most well known and the most used and the most coded number is of course time to hire. And why do people prefer time to hire over time to fill? Very simple time to fill means from the very beginning of getting agreed that a job can be actually, be that actually a vacancy. From the very beginning of getting that agreed to first day work. There can easily be a year or longer when you, for example, want to hire someone in the IT tech sales area, where very quickly they have regulations where someone can't leave for six, eight or 10 months because they are an ongoing project before they can move on.
So time to fill is always quite long. However, it's at least an honest number. Time to hire is also honest. When you do it honest, however, it means as soon as you start recruiting, the beginning of the recruiting process to acceptance of the contract. And of course they pick acceptance of the contract because it can still be 10 months before the person turns up, when they have very long terms in their old contract with their Former employer. However, you can see time to hire, beginning of recruiting, to agreement of contract. Agreement of contract is a very clearly defined end. That's good.
However, when does recruiting start? And again I see that people tell me oh yeah, we have time to hire here.
Two weeks, four weeks, six weeks. Amazing, amazing. I just wonder why all these board level people in the same business complain about not having talent when everything is so short and so quick. When does recruiting really begin? It doesn't begin when the job ad is online. Because before that you speak to an agency, you speak to designers, you speak to people who write the copy, people who write everything that is going to be appear online. You probably before that have to do a whole pitch between different agencies.
Before that you have to choose which agency do you actually want to choose, which agency do you invite for the pitch, etc, etc. So the real beginning of that recruiting process is when you start to research the agency. That is when you begin. When you then say, hey, we have an agency and we keep the long term, of course, then of course time to hire get shorter. But it still starts with a moment when you talk with the agency and say hey, we got something new or we need to have a job at up there for this and that. That's when the recruiting begins, not when the job ad is online. Stop doing fake numbers.
And we do. And then we see it over and over again. When you sit there and you wonder why, why are our numbers all so bad? Look here, it was six months here, four months there with all the interviews and I see other businesses, three weeks, two weeks, how do they do that?
Is it just magic? No, no.
Probably you are the only honest one sitting there at that table. So time to hire from the beginning of the recruiting process until the contract is signed. So now of course we have to look at how do we implement all of that. Implementation is crucial here and very important. Step number one is roles. You need to know who is doing what, otherwise it's all going to become completely pointless. When you now say I am on my own in recruiting, congratulations, you just defined all the roles which are all with you.
Good luck from here. And as soon as you have roles defined, who does what, always look at reports. However, we have the DIKW role Data, information, knowledge, wisdom. When you have one point of data, it doesn't tell you much. It's a starting point, that's why you have it. But it doesn't tell you much. And please do not compare wildly different companies to each other.
By the way, the comparison I told you in the beginning was a real one taken by a manager during a conference who said, I compare my business where we can hire super quick in London to Aberdeen. That is just surreal. The regions aren't even remotely comparable. Nothing, probably not a single life metric between Aberdeen and London is comparable. So it is just like someone at Aberdeen would say, look, my IT people work for less money than your London people. Maybe I'm just a better negotiator. No, maybe just cost of living are way lower in Aberdeen compared to London. So. Except when you go to nightclubs.
Michael GOVE but that's a different story. So reports are important, but D the data is the beginning, that is step number one. You have one data point, then the I information gets on top of that and that's the second data point.
Now you can compare between. Okay, so this is what we did the first attempt, second attempt, so you see at least a comparison with the third data point. So for example, you have three months or three quarters of the year, the K is knowledge. Because as soon as you have three data points, you can see a certain trend. And when you have a fourth data point, so for example, when you do it quarterly and you have four data points, you have a full year with four data pairs. You have data points, you have wisdom and then you can do forecasts. Of course you should have more than four data points and you should look at it long term.
This was just a very simplified example, but the principle always is data, information, knowledge, wisdom. You cannot just take data and compare it to wildly different organizations. Then say we're doing well or not so well. Because what people do there, as soon as you just compare with other businesses, you just do cherry picking and say, look, we just look at the numbers where we're good and then we compare to others and say how great we are. And we're going to present that to the board. No, that doesn't lead you anywhere. The final step, the most important one, is always responsibilities and accountabilities. Responsibilities. Who is putting into practice, who is doing the change we want to change.
I give you a very simple example here. And accountability, by the way, who's going to present it to the board? Get the budget, get the degree sign puts the signature in and puts their head. And if things go right or wrong, and you need to do that based on all of the five numbers, we had way more numbers, of course, but these five, when you for example, have say time to fill and your time to fill goes up, up, up, up, you might be very inefficient or there might be a different reason, maybe you open a different location or you outsource the service center or you have lots of people calling in sick and that's why things go slow. Or maybe you're just inefficient and then you have to look at that as well. When your offer acceptance rate is low, please check if your offer is still comparable to the market or if you suddenly have a competitor who's way better than you. So you have to do the market research here.
If suddenly the cost per hire goes up, it can be that you simply didn't negotiate well, it can be that you're very inefficient. But it can also be that just the pandemic happened and you have a 10% price hike all of a sudden. So all of that needs to be taken into account. When you have a quality of hire going up or down, you can say when it goes up, you probably pick the right people. When it goes down, you have to see do we hire on the wrong? Maybe our onboarding isn't great. Or maybe one of the people who evaluate, for example, when you have a dip, always at the same position in the organization, you should check is the person properly trained on what are the expectations?
Or maybe the expectations are too high or the leadership is just too bad and people leave there. And that's why we tell that they are, we say they are bad because they leave. But in reality they aren't bad, our leaders are. So you need to take that into account. And when you have time to hire and you see time to hire goes up maybe and that's step number one, be honest with your recruiting times and then look at what can you do more efficiently, how can you use AI in the system? And of course it's very different from the US to the UK to the EU with the GDPR loss that we have in place there. But look at what you can do to optimize what you have.
But you need data and data gives you the task to put different tasks on different people's desk to their responsibilities so they can do something about that. But the accountabilities with the leader to get the budget to actually change something for the better. Because when you change things for the better based on the data, your recruiting will get better. Of course, when you consider the csf, the soft factors, the critical success factors and everything from your reputation to the future colleagues, you're going to have to, the productivity will go up and that's what you aim for. And I wish you all the best implementing that in your organization. And when you now say, oh, I'd like to talk a bit more about that, feel free to do so. So first, when you're listening to us on YouTube, feel free to leave a like here, subscribe to my channel.
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Thank you very much. So when you now say, okay, I'm going to want to put this into practice, get into action. The sooner the better. It is very important that these numbers are known in the recruiting world, because recruiting cannot be based on feelings. If you now say, hey, I still need help, feel free to send me a message. I'm looking forward to hearing from you. I'm answering every single message within 24 hours or less.
I'm looking forward to hearing from you. And at the end of this podcast and at the end of the videocast, there's only one thing left for me to say. Thank you very much for your time.